You short sold 350 shares of stock at a price of $32 and an initial margin of 60 percent. If the maintenance margin is 30 percent, at what share price will you receive a margin call? What is your account equity at this stock price? 

You short sold 350 shares of stock at a price of $32 and an initial

A margin call occurs when the equity in the account falls below a certain threshold. In this case, if you short sold 350 shares of stock at $32 with an initial margin of 60%, then your maintenance margin is 30%. This means that once your account equity drops below 30% of the total value of the securities held in it (in this case, $10,400), you will receive a margin call.

To figure out what stock price would trigger a margin call in this scenario, we can start by calculating how much equity is needed to maintain that 30% level: $10,400 = 0.3 x Stock Value. Solving for Stock Value yields an answer of 34,666.67; so any share prices below or equal to that amount will result in a margin call and could lead to liquidation.

At a share price of $34666.67, your account equity would be equal to exactly 30% – or 10400 dollars – as any lower and you would have failed to meet your required maintenance margin level which triggered a margin call from your broker and require additional deposits into your trading account. Any higher than this price and you still have some positive equity left before being forced into liquidation due to not meeting the minimum requirement percentage set forth by the broker’s regulations on maintaining sufficient funds on deposit for investments made with borrowed money (margin).